Merger in online classified ad arena

Tribune, Knight Ridder to buy Headhunter.net

August 25, 2001|By Barbara Rose, Tribune staff reporter.

In a deal aimed at making newspapers more competitive in the business of online help wanted ads, media giants Tribune Co. and Knight Ridder Inc. have agreed to buy Headhunter.net Inc. and merge it with their jointly owned CareerBuilder Inc.

The $200 million cash acquisition, announced Friday, will make CareerBuilder a more potent competitor to the leading jobs site, Monster.com, owned by TMP Worldwide Inc., an employment advertising company and executive search firm.

The deal, expected to be completed by early next year, offers Headhunter shareholders $9.25 a share, a 33 percent premium based on Headhunter's $6.95 closing price Thursday. Tribune, which owns 11 daily papers and 22 television stations, as well as Internet operations, will split the cost with Knight Ridder, the nation's second-largest newspaper publisher.

Combined, the merger will create a network of CareerBuilder sites with more than $100 million in sales, and positive cash flow in the first quarter of 2002, said Tribune Interactive President David Hiller. "The addition of Headhunter significantly enhances our ability to become profitable."

CareerBuilder CEO Rob McGovern said that when Tribune and Knight Ridder bought the online business a year ago, the strategy was to start "a two-horse race" between CareerBuilder and Monster.com. "Our mantra ... has been to create the Pepsi/Coke challenge in the online recruitment market."

Friday's deal brings CareerBuilder closer to that goal.

"This offers a much stronger competitor than Monster has seen as No. 2," said Goldman Sachs analyst Michael Beebe. "It could be good for the market in the sense that you'll have a strong No. 1 and No. 2, and both are incentivized to make the market grow."

Industry analysts estimate that about $1 billion of the $8 billion market for recruitment advertising this year will be generated from online sources.

CareerBuilder's network, including the online pages of its owners' papers, has more than 4 million unique monthly visiters. Combined with Headhunter's traffic, the number will total about 6 million, based on Jupiter Media Metrix estimates.

That puts CareerBuilder neck-and-neck with Monster.com until Monster completes its merger with another leading career site, HotJobs.com Inc. Combined, Monster and HotJobs' traffic in July exceeded 12 million visitors, according to Jupiter, but there is believed to be a significant overlap in users.

To promote CareerBuilder, Tribune and Knight Ridder executives said Friday they intend to redesign their help wanted sections using the CareerBuilder name. The effort will start Sept. 30 in the Sunday editions of 10 newspapers, including the Chicago Tribune.

The Tribune will replace its Sunday Working section with a newly launched CareerBuilder section. The Working section will continue to be published on Wednesday.

Analyst Beebe called the Headhunter acquisition a "very sensible transaction" that combines Tribune's and Knight Ridder's newspaper promotional powers to build a credible competitor to Monster.

But he cautioned that the push to build CareerBuilder will test the publishers' commitment to Internet advertising.

"In order to grow an interactive business, the newspaper has to be willing to sacrifice some very profitable print revenues, and newspapers haven't always been willing to do that," he said.

Help wanted ads contribute about half the newspaper industry's high-margin classified revenue, Beebe said. The online alternative is marketed as a more efficient and less expensive alternative to print ads.